Story Case

Amos Reeves bought a horse of Simon Burnett. After the purchase was made Reeves instructed Burnett to deliver the horse to Edward Boardman's barn. He then stated that the purchase had been made for Boardman. That is, Reeves made the purchase for an undisclosed principal, when Burnett thought he was acting for himself. This was done because Burnett and Boardman were not friends. When Burnett learned for whom the horse had been bought, he refused to deliver, although the purchase price was offered. He stated that he would not contract with Boardman, and was not under contract with him. Boardman brought suit against Burnett for failure to deliver the horse. For whom should the judgment be given?

Ruling Court Case. Tutt Vs. Brown, Volume 5 Litt. Ky., Page 1, Also Volume 15 American Decisions, Page 33

George Tutt, son of the plaintiff in this action, while in the service of his father and acting for his benefit, contracted with Brown to transport, in his father's wagons, certain property belonging to Brown. For the services, Brown agreed to pay him a certain sum, not knowing or thinking that the son was merely an agent. Brown failed to pay George the price agreed upon for transporting the baggage, and this suit was brought in the name of his father to recover the price.

Justice Owsley delivered the opinion.

It is a well-settled principle that the principal may hold a third person upon a contract made for his benefit, even though at the time the contract was made he was not disclosed, or known to the third person. This right of the principal to hold the third person is limited. "Thus in an analogous case Lord Mansfield also erred: 'Where a factor dealing for a principal, but concealing that principal, delivers goods in his own name, the person contracting with him has a right to consider him, to all intents and purposes, as the principal,' and though the real principal may appear and bring an action upon that contract against the purchaser of the goods, yet that purchaser may set off any claim he may have against the factor, in answer to the demand of the principal."

Ruling Law. Story Case Answer

When an agent goes out to act in a representative capacity he generally makes known who his principal is, or at least that he has a principal. But, if he does neither, he is said to be acting for an undisclosed principal. However unjust it may seem, it is a familiar principle of Agency that a principal may enforce a contract, made for his benefit, against the third person, even though he was not disclosed when the contract was made, and even though the third person would never have contracted with him, had he known it, as in the Story Case. Of course, if the third person has any defense against the agent with whom, alone, he thought he was contracting, it would not be fair to deny him the right to this defense against the principal, and so it is universally conceded that any defense good against the agent is good against the undisclosed principal, if he should start suit.